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The fact that Americans are living longer has made the usual approach to financial planning incomplete, according to… A new study of nearly 1,200 people and 10 focus groups was conducted by MIT AgeLab and Transamerica. The report finds that the traditional three-part plan of education, work, and retirement, which aims to ensure people have enough to live comfortably after retirement, fails to take into account Americans’ increasing longevity. Instead, the researchers who prepared the report call for a focus on three factors: well-being, work and finances as the three main stages of adulthood.
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Americans are Live much longer Their life expectancy outpaces their grandparents and great-grandparents, with average life expectancy rising from 68 years in 1950 to nearly 79 years by 2009. And with these longer lifespans come longer retirement periods. While a man who retired in 1970 lived less than 13 years in retirement, the average retirement length for men in 2020 was nearly 19 years. A person who turns 65 in 2023 has about a 50% chance of living another two decades.
This trend is expected to continue. While there were approximately 92,000 octogenarians in America as of 2020, that number is expected to nearly triple in less than 25 years, for a total of an estimated 270,000 Americans over 100 by 2045. In other words, If they stop working at age 67, they can spend up to 33 years in retirement.
To get an idea of how long 33 years could take, consider that in 1990 George H.W. Bush was president, Madonna was at the top of the music charts, and the No. 1 TV show was “Cheers.”
“While Americans are generally optimistic about their future, they may not fully appreciate how their financial needs, priorities, and life circumstances will change over time,” said Dr. Joseph Coughlin, director of the AgeLab at MIT. “More than ever, planning for longevity means understanding what is most important at each stage of adulthood, finding balance, and supporting priorities with behaviors and actions that lead to a better future.”
“The way we approach our lives and the way we work is changing,” said Phil Ekman, head of workplace solutions at Transamerica. “People want flexibility and choice in all aspects of their lives, whether at work or at home.”
Traditional financial planning was based on what, by today’s standards, is relatively short-term Retirement. This meant that entertainment was the focus, building up enough of a nest egg to fund what now looks like a relatively short retirement. But now that the duration of retirement has increased significantly, this stage of life has become dynamic rather than just about entertainment.
The report concluded: “Older adulthood is when clients begin to celebrate goals they’ve been saving for, such as dream vacations or having more time to spend with family, but it’s still a time when many should be ready to live for several more decades.” “. .
This means that retirees can benefit from it Financial advisors as trainers To understand the complexity of this stage of life. They may also be able to help them understand different ways they can “prioritize social, emotional and physical well-being over financial or work-related goals in the next 10 years of their lives,” according to the report.
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From striving to advance their careers to caring for children and parents, middle-aged adults face complex and emotional challenges. With such a range of challenges, it’s not surprising that this group had the lowest rates of exercise and said they ate less healthily than any other age group. One implication of this is that people in this group should work with their financial advisors to prioritize to make sure they are taking care of themselves, financially and in other ways.
“Financial professionals can act as agenda setters for midlife clients, helping them anticipate
“Future needs, challenges and celebrations,” the report stated. “For example, financial professionals can support clients who are in a caregiving role today, while helping them anticipate a time later in life when they will need care themselves.”
The study also found that this group tended to be motivated to invest in their well-being, establish themselves in their careers in the short and long term, and start Saving to achieve key financial milestones.
Younger adults can benefit from the advice of financial advisors to adopt new habits, routines and attitudes that will prepare them for the near and distant future. They should also work with financial advisors to create an appropriate emergency fund and build their net worth.
Retirement It’s not just about money. A longer life means that retirement will be much more dynamic than the focus on leisure time that our parents and grandparents enjoyed. Increasingly, it’s more about overall well-being. This is something that includes having a sufficient nest egg, but is increasingly about relationships, personal goals, health, and career opportunities. The report concludes that access to financial advice at every stage of adulthood is key to a healthy retirement.
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